《The Great Divide: Unequal Societies and What We Can Do》后感

The book is called The Great Divide: Unequal Societies and What We Can Do About Them, which has showed the main topic of the book. Economist Joseph Stigliz, Nobel-Prize-winner, discusses the growing inequality situations in the contemporary age. Meanwhile, the author also recommends suggestions for ordinary people to encounter the problem.

This book is composed of short articles from other publications like Vanity Fair and the New York Times. It can be noticed that these articles are written in different times, which could cover a long period of time. Therefore, the book collects the past experience to guide the future.

The structure of the book

The book consists of ten sections, which fully introduces the background, causes and measures.

The first section is a Prelude, which discusses the economic recession in the year of 2007 and 2008. This section shows the harsh situations and related actions in the economic recession. The author concludes that the economic recession is the background for the current increasing inequality.

From Part I to Part V, these sections contain articles describing the inequality, personal reflections connected with Stiglitz’s life, dimensions of inequality such as student debt, mass mortgage refinancing and health care like Ebola, causes of America’s growing inequality such as a tax system that favors the elite, and consequences of the inequality.

From Part VI to Part VII, the author further elaborates on his argument on the topic of inequality. On the one hand, he analyzes the influence of different policies, listing a lot of international and internal policies. On the other hand, the author discusses it from regional perspectives of Mauritius, Singapore, Japan, China, Australia, Scotland and Spain. The author doesn’t limit the topic in the United States only but extend to the international community.

In Part III, this section consists of articles that the author outlines a variety of actions America should take to fight against inequality. These actions include the functions of jobs and the innovation enigma.

Finally, in an Afterword, Cullen Murphy, editor of Vanity Fair, takes an interview with Stiglitz about conservative critics who claim that the rich people create a large number of jobs.

Each of the ten sections of the book is preceded by a lengthy introduction providing an overview of the topic of that section.

Key focuses and meanings of the book

In this part, two key focuses and their meanings will be discussed.

On the one hand, the distribution of the income and the gap between the rich and the poor reflects the inequality. The author believes there is a vicious circle in which more economic inequalities are transformed into more political inequalities, which is a result from the policies and economic development.

Firstly, the upper 1% of Americans almost occupies a large proportion of the national income of the United States. For example, the upper 1% of Americans occupies about 40% of the national wealth in 2011. Recently, the world's top 1% of people now own about half of the world's wealth and there is a tendency that their wealth continues to grow in the future. Even worse, they are on track to occupy the wealth from the rest of the 99% in the world.

Boosting the upper 1% hasn't helped American internationally. The United States have transformed from the world's greatest creditor nation to the world's greatest debtor nation. China's economy is becoming larger and has become the largest creditors of the United States. The United States are worried about not having enough savings. From this point of view, the United States is in danger and hasn’t strong support internally.

Secondly, the author summarizes that the inequality of income distribution and the gap between the rich and the poor is a cumulative result of unfair policies and misleading priorities. The author points out that the upper 1% of Americans enjoys deregulation, tax cuts, and tax breaks. These policies derive from the management of President Reagan. The government should bare responsibilities of the income inequality. The author makes a comparison between China and the United States. With the development of China's economy, China has made about 500 million people out of poverty. Meanwhile, during that same period of time period, the financial and economic situation of a typical American family has declined, which is mainly due to the recession of 2007 and 2008. Stiglitz also points out that both economies of China and the United States have a wide spread inequality. Moreover, he adds that an economic model that doesn't fit a majority of citizens of a country is unlikely to become a role model for other nations to imitate. One country has to find a correct path in accordance with the situations of the country. Otherwise, it will mislead the economy and the negative consequences will be undertaken by the ordinary citizens. Therefore, the proper usage and formulation of policies are an important topic for a country.

Thirdly, the author suggests the measures to mitigate the income distribution. The author recommends more investment on education, science and infrastructure, supporting homeowners instead of financial institutions like banks, raising employment rate for American citizens and making more efforts to recovery the economy.

On the other hand, the author believes the international free trade has created inequality.

Firstly, trade deals in contemporary times are significant different from those made in the decades following WWII. After WWII, the negotiations were focused on lowering tariffs of trade and the U.S. made a large number of profits, because the United States is the biggest economic power in the world. However, in recent years, the focus has shifted from lower tariffs to non-tariff barriers and a large number of regulations are formulated. Today's negotiations are being carried out secretly and formulated many different non-tariff regulations. With the effect of these regulations, a company can establish a subsidiary in another country and then make deal with its own country. As a result, the company has made profits themselves and avoided the regulations in its own country. For those giant countries, they can have the power to utilize the benefits of the non-tariff trade, but it is unfair for the small enterprises. These small enterprises are used to be protected by the tariff regulations and the non-tariff barriers have made their profits reduced.

Secondly, free trade supporters assume that the winners could make compensations on the losers, creating a win-win outcome. However, this assume is on the basis that the economy is at full employment, thereby allowing displaced workers from low-productivity sectors previously protected by tariffs and other restrictions to move to high-productivity sectors. However, in reality, it is impossible that this situation can exist in the current society. Giant companies like Boeing, Caterpillar and G.E. don’t compensate other companies at all. As a result, there are already 20 million Americans who used to have a full-time job but now lost their jobs. Even worse, those workers who displaced from low-productivity sectors are experiencing the risk becoming zero-productivity unemployed, hurting even those who keep their jobs. Further, with the widespread of international free trade, American workers have no choice but to compete with those abroad. Like in China and Mexico, the labor cost is so low that these companies will hire labor in low-cost countries instead of the workers in the United States. A lot of factories are moved to abroad and the local Americans are laid off. Finally, free trade promotes the theories of comparative advantages. The comparative advantages mean making use of the comparative resources in one country and select other disadvantageous resources in other countries. As a result, the local economy will be greatly influenced.

Thirdly, Stiglitz states that no trade agreement should prioritize commercial interests ahead of broader national interests, including allowing the export of American gas and oil, sale of American uranium interests to Russians, off-shoring the sourcing of rare earths, etc. Some trade agreements are always insisting on financial liberalization and deregulation, even though the Great Recession should have given a severe lesson to the United States that the lacking of good regulations can jeopardize the prosperity of the economy.

Conclusion

After reading the book, several aspects impress me most, which reflect the current situations and make me have a deeper understanding about out life. Stiglitz finalizes his book with an optimistic attitude. Firstly, inequality is not inevitable in the United States of America and all around the world. Stiglitz believes growth and fairness can coexist, but the key element of the coexistence is the suitable policies. Secondly, he also hopes capitalist countries can overcome the economic inequality and political and moral issues, despite he complains about the ineffectiveness of capitalism in twenty-first-century. Finally, he believes if the United States can reinvest funds to support people and formulate the other policies that he describes, the United States can live up to the shared American dream and form a more prosperous and equal society.

Reference

JE Stiglitz. (2015). The great divide : unequal societies and what we can do about them. W.W. Norton & Company.